BB 2011-05-13 Regional Integration and the African Textile Industry

Regional Integration and the African Textile Industry

Part 8: African textile industry and Regional Integration

This final section will look at how regional integration currently does, and how it could in the future, assist the African textiles industry. This analysis will assess the current regional initiatives, those sought after by the industry, and those foreseen by the regional bodies themselves for the future of the textiles industry in Africa. This detailed analysis will allow for a series of recommendations and conclusions to be drawn about the relationship between the textiles industry and regional integration in Africa.

The main question concerning the competitiveness issues that needs addressing is: at what level should they be dealt with?

Identifying the key competitiveness issues of the African textiles industry has been done in a series of reports over the years – and the issues have always been more about the choice of solutions, the most appropriate level for action and which international partners would assist in the various aspects. The activities of development partners is often a serious issue for the local industry, because the number of different programmes and activities that are being run at one time can be confusing, conflictual and even overlapping. Greater coordination and agreement on some basic fundamentals in the area of regional integration, and how to assist, would benefit the local industry and local integration.

This has left a much more difficult task of understanding who should take responsibility for which project and initiative, and whether this should be done at a national, regional, cross-industry or sectoral level. As the figure above suggests there are some clear-cut regional issues, and some clear-cut national ones, but there are also a significant number that fall into a grey zone between the two, which can create tensions and competition. This grey zone can also undermine regional integration initiatives, because the good of regional integration can be undermined by certain national measures, such as support or protection measures. In this sense it is almost imperative that, given the challenging environment for textiles in Africa at the moment, new regional approaches and solutions to the issues are found and discussed openly. This section will also clearly identify the national issues and explain their incompatibility with regional integration, meaning that a constructive dialogue will be possible over how to work with these issues – because they are nearly always very sensitive national issues.

Not only is the stakeholder picture complicated, but the fact that the supply chain is so long adds a further complication. Throughout the different stages in the supply chain, identified in section two, regional integration has something to add, in some way, shape or form, but this is very difficult to achieve down an entire supply chain. This can be illustrated by taking aspects from the earlier figure, ‘The Cotton to Clothing Supply Chain in Detail’ and applying some analysis as to where regional integration could intercede to effectively enhance the supply chain. This is done in three stages as follows as an indication of how regional integration is, and can, benefit and threaten business.

Regional integration and textile supply chain one

As the above figure shows each stage of the early supply chain for textiles could benefit from some form of regional measures- that is from tariffs, procedures, standards or storage facilities. All of the measures are about rationalising and improving cost-effectiveness in the chain. It is worth looking at these measures in more detail as their implications vary considerably. At the very beginning the quality of seed needs to be improved and this can be done by importing seeds with 0% tariff in the CET– which will ensure the cheapest possible supply available. In the production phase productivity is an issue that was highlighted as being very important, something that could benefit from regional support facilities and best-exchange practises and regional research facilities. This is a little less straight-forward because the creation of a regional centre implies the closure, or marginalisation, of local centres. The issue of transport was raised as a key impediment to the industry and here regional infrastructure projects would be beneficial to all industry in the region, not just the textiles industry. Obviously these high investment projects are very politically sensitive and difficult to achieve, but they are fundamental to long-term success. The most common way to tackle this issue would be through the creation of an enabling regional regulatory framework for Public-Private Partnerships (PPP). A solid regional PPP framework could encourage increased FDI in the region in areas where it will be of cross-sectoral benefit, such as energy and physical infrastructure. For collection and storage the notion of regional collection and storage facilities has been evoked, but again this implies rationalisation within the storage and collection industries and as both would be best suited near ports, or with easy infrastructure access, this will prejudice where they are likely to be located. In this sense the difficulties of regional integration start to become clear as a regional value chain will necessarily be most cost-effective if every part of the chain is the most efficient within the region- which can lead to significant political difficulties in accepting local closures and relocations. Obviously countries with good port services and infrastructure are at a distinct advantage in this sense and tension will undoubtedly arise over the distribution of regional benefits.

A further element that becomes apparent in this analysis of the early supply chain is that from this very early stage regional integration has to consider the long-term insertion of the value chain into global supply chains. This long-term objective should not be lost from view and the measures that have been outlined above are all there to try and better link and prepare the regional value chain for global exposure, and ultimately insertion.

Regional integration and textile supply chain two

The next part of the value chain reveals a similar pattern whereby tariffs for imports, best practice and information sharing, and common procedures stand-out as immediate benefits of regional integration. On the issues of tariffs on machinery there is also the issue of government upgrade funds to help local industries replace obsolete machinery with newer machines, and hence improve their productivity. This issue will be treated later in this section. A new element in this part of the value chain is the idea of having investment in regional design capacity and skills, although again how to implement this will be a very difficult choice because it implies rationalisation.

Final stages of the value chain:

Regional integration and textile supply chain three

The final stages of the value chain are also ripe for regional integration assistance. The most poignant example is through the creation of common marketing and the creation of a regional identity and regional outlets to pool resources. A regional body will also be better equipped to negotiate market access terms to the most important markets for the African producers, already seen to be the US and the EU.

From this analysis it is possible to relate these regional possibilities to the regional integration framework developed in section one, to understand how business needs to engage and advocate its positions.